What Are the Advantages of a Testamentary Trust?
A testamentary trust is a document that is added to your will, to offer direction for your trust assets once you die. You will need to choose a competent trustee who will handle the trust for your surviving relatives and beneficiaries. The role of your trustee is to distribute the trust income, as well as the principle in whatever way you direct, per the instructions left in the trust. The trustee needs to be a person of character, because this individual will be making every administrative and asset management decision related to the trust in your absence.
What Are Common Types of Testamentary Trusts?
Testamentary trusts tend to have a theme, in that they describe the trust agreement or beneficiaries they are trying to protect. Read on for more information on types of testamentary trusts.
Qualified Terminable Interest Property (QTIP) Trust
The QTIP trust will determine who receives trust property after your surviving spouse’s death. On your death, your spouse will receive your property, but who does it go to after your spouse also dies? These questions are answered with a QTIP trust agreement. There will be an executor named who will administer the estate, real property or possessions, to ensure that your wishes are being managed to the letter when the time comes.
Bypass or Credit Shelter Trust
This type of trust allows bypassing or minimizing taxes that will attach to the surviving spouse’s estate, to leave more money in the trust for children to inherit at a later time. This trust has some tax consequences and limits, but it is beneficial to consider with sizeable estates.
Life Insurance Trust
In the event that you have large insurance policies, you may want to put your life insurance into a life insurance trust. That way, the trust owns the policies and will decrease your total estate, to prevent estate taxes, or at least significantly reduce them.
Trusts Can Be Set Up to Manage Your Final Wishes, Whatever Those May Be
Your final wishes are important to you today, and will be even more important to know that they will be carried out once you are gone. You can set up a trust to protect your children, their inheritances, and for many other trust interests. You will want to talk to a Texas estate planning attorney versed in many different types of trusts, to ensure that they are set up correctly and will function as you expect on your death.
When you want more information on testamentary trusts or any other type of trust document, call our office for more information. Trusts are not complicated documents to consider adding to your estate planning goals, but they do need to be well thought out in advance to function the way you want them to once you die.